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Financial Times / Biz - Money

US producer prices rise less than expected in August

US producer prices rose in August, albeit less than expected, reinforcing the view in the market that Federal Reserve officials will take a more cautious stance as they try to determine the pace of future rate rises.

The producer price index – a key measure of industrial inflation –nudged 0.2 per cent higher last month from July, the Labour Department said on Wednesday.

The rise was smaller than the 0.3 per cent increase the market was expecting. On an annualised basis, PPI increased to 2.4 per cent from the 1.9 per cent pace recorded in July.

Stripping out more volatile items like food and energy, inflation at the wholesale level was up 0.1 per cent month-on-month — also weaker than the 0.2 per cent increase economists had predicted.

The lack of inflation pressure initially sent yield on the 10-year Treasury note slightly higher before dropping again. It is currently trading unchanged at around 2.1620 per cent.

“The performance of the real trade weighted dollar points to mild upward impetus in core import prices,” said Joshua Shapiro, chief US economist at MFR.

“Combined with better, yet still moderate, global growth, this suggests that the core PPI may drift a bit higher in coming months. However, with major moves in prices at the producer level necessary to spark significant shifts in prices at the consumer level, we do not believe there is any cause for concern whatsoever (in either direction) from recent PPI data nor in all likelihood from what lays ahead.”